Sustainable Growth Rate of Trilby & Tribble, Ltd

C

To determine the sustainable growth rate of a firm, we need to consider several factors, including the return on equity (ROE) and the retention ratio. The sustainable growth rate represents the maximum rate at which a firm can grow its sales, earnings, and dividends without relying on external financing.

Unfortunately, the given information does not include the ROE or the retention ratio directly. However, we can use the formula for the sustainable growth rate to solve for it. The formula is as follows:

Sustainable Growth Rate = ROE x Retention Ratio

We need to calculate the ROE and the retention ratio separately and then multiply them to obtain the sustainable growth rate.

1. Calculating the ROE: The ROE can be calculated using the DuPont formula, which decomposes it into three components: profit margin, asset turnover, and equity multiplier. However, since we don't have the necessary data for these components, we cannot calculate the ROE directly. We'll need additional information to determine the ROE.

2. Calculating the Retention Ratio: The retention ratio represents the proportion of earnings that the firm retains to reinvest in the business instead of distributing them as dividends. It can be calculated using the following formula:

Retention Ratio = (1 - Dividend Payout Ratio)

Unfortunately, the dividend payout ratio is not provided in the given information. Without this information, we cannot calculate the retention ratio.

Based on the information provided, we cannot calculate the sustainable growth rate accurately without knowing the ROE and the retention ratio. Therefore, we cannot determine which answer choice, A, B, or C, is the closest to the sustainable growth rate of the firm.